Zero-hours contract reforms could burden firms with up to £2.9bn annually

A government-commissioned review released on Wednesday indicates that the upcoming crackdown on zero-hours contracts could force businesses to absorb costs anywhere from £350m to £2.9bn annually, based on the eventual hour threshold. The analysis places the most likely expense at £1.1bn, with a potential £1.2bn arising from mandatory compensation for last-minute shift cancellations. Officials note that the reforms may increase administrative burdens and reduce firms' ability to adjust staffing to demand fluctuations.

The hospitality and retail industries, which depend heavily on variable-hour workers, are projected to be the most affected. Skills Minister Baroness Jacqui Smith defended the policy as a step toward fairer pay, while the British Chambers of Commerce and the British Retail Consortium warned that the financial strain could hinder hiring amid a youth unemployment crisis. The Trades Union Congress highlighted that the extra costs would mainly stem from employers cancelling shifts, a practice the legislation aims to eliminate.